Economy grew at 5% annual rate in third quarter, best since 2003

Boosted by consumer spending, the economy grew at the fastest pace in a decade during the third quarter

The U.S economy grew at its fastest pace in more than a decade during the third quarter, a significant increase over earlier estimates that was triggered by stronger consumer spending, the Commerce Department said Tuesday.

Total economic output, also known as gross domestic product, increased at a 5% annual rate from July through September. That was a major jump from an estimate last month of 3.9%.

The big rise in the final revision of the data surprised economists, who has forecast the figure to be 4.3%.

The last time the economy grew faster was in the third quarter of 2003, when growth was at a 6.9% annual rate.

The economy grew at a 4.6% annual rate in the second quarter of this year.

With the fourth-quarter data, it was the best six-month stretch of economic expansion since 2003.

"This is literally shoot-the-lights-out sort of stuff," said Chris Rupkey, chief financial economist at Union Bank in New York.

The report helped send the Dow Jones industrial average above 18,000 for the first time in early trading.

Rupkey stressed there were "no smoke and mirrors" in the data, which were powered by consumers.

Consumer spending increased 3.2% in the fourth quarter, much better than initially estimated and up from 2.5% in the previous quarter.

Federal government spending rose 9.9% after a 0.9% drop in the second quarter.

And business investment also was strong, rising 8.9% in the third quarter, though that was down from 9.7% in the second quarter.

Despite the boom from spring through fall, a weak first quarter has dragged down overall annual growth this year to less than 3%.

The economy contracted 2.1% from January through March, which economists attributed to severe weather in much of the country.

The government won't release its first estimate of fourth-quarter growth until next month and economists expect it to show a drop-off from the third quarter.

In a sign of that, the Commerce Department reported Tuesday that orders for long-lasting durable goods fell 0.7% in November.

It was the third time in four months that the figure, a closely watched indicator of growth, has fallen.

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